Estate Planning For Blended Families
Blended families can provide wonderful benefits, as well as unique challenges. In addition to helping the kids get along or new spouses learn parenting techniques, blended families require special care and attention when it comes to successful estate planning.
Today we’re going to dive into the intricacies of blended family estate planning, including; why it’s different, scenarios you want to avoid, and special steps you need to take to make your estate plans a reality.
Why Is Estate Planning for Blended Families Different?
Blended families can come in many forms, it may be a second marriage for a couple of grandparents, or it could be a second or third marriage for someone with children. Regardless of exactly how your blended family is structured, chances are you want to make sure everyone is looked after and that your affairs are not only planned out, but also updated to reflect your current lifestyle and family situation.
For blended families, estate planning – which already seems like a daunting task – becomes even more complex. Unlike first marriages which can seem relatively cut and dry, parents and spouses of blended families face the challenge of updating their estate planning, defining what assets are owned individually and which are shared, and planning for not only their spouse – but also their children and their spouse’s children.
Unwanted Scenarios That Blended-Family Estate Planning Can Help Avoid:
- Ex-spouse inheriting your assets…
- Accidentally disinheriting your own children…
- Failing to provide for your new spouse…
- Friction between your intentions and reality…
Ex-spouse inheriting your assets…
One of the most common unwanted scenarios that comes from neglecting your estate planning after a new marriage is accidentally leaving assets to your ex. This can happen because you fail to update your will, if you have jointly-owned assets with your ex, or if you fail to update your beneficiaries.
Remember, you can’t just update your will to reflect your new spouse and family situation, you also need to update any and all beneficiary forms that name your ex-spouse. Otherwise, they will inherit those designated assets because a will does not overrule a beneficiary assignment in a contract.
Accidentally disinheriting your own children…
Before you update your policies to name your new spouse as a sole beneficiary and before you leave them all your assets in your will, make sure you’ve structured the inheritance in such a way that while your spouse will be provided for, you’re also not disinheriting your own children or other heirs.
Usually the way this happens is someone leaves their estate to their spouse, with the intention that the children will receive a portion of it when their surviving spouse dies. However, unless those provisions are clearly outlined, like in a trust, the surviving spouse could inadvertently, or purposely, leave their whole estate to their own children, not yours. This can happen if they die intestate (without a will) or if they haven’t designated your children as heirs.
Failing to provide for your new spouse…
Conversely, it’s not uncommon to fail to update wills and beneficiary designations to make sure you provide for your new spouse. This is especially true for marriages later in life where you may have old life insurance policies or financial accounts you don’t deal with much and that have outdated beneficiary information.
Once again, it’s not enough to just update your will, it is NOT a catch all. You need to also update your designated beneficiaries to include your new spouse.
Steps You Can Take Now:
Determine What Estate Planning Looks Like for Each of You, and For All Your Children
It’s not enough to plan for the death of one spouse, you need to plan for each of you. This is especially true if either of you have children from a previous relationship.
In addition to estate planning in the event that one of you dies, you also need to determine what you want to happen when you’re both gone. To say it another way, you want to make sure any assets you leave to your spouse, or vice versa, with the intention of having any remaining assets go to your children, actually go to the children.
One way to be certain your spouse is provided for and your children or other beneficiaries are not accidentally disinherited in the event of the surviving spouse’s passing, is to create a trust that outlines the details of your estate plan and ensures the assets are distributed exactly as you want them to be both in the event of your death, and the death of your spouse.
Check Your Beneficiary Designations
Make sure that you have reviewed any old policies and updated your beneficiaries if you haven’t already. While it’s important to also update your will, don’t forget to take the next step and review the policy designations and adjust them as well.
Plan for Assets You Own Alone and Jointly
Chances are you already have a plan for assets you share since they’re likely more recent and account for the updated relationship status, but it’s important to also plan for the distribution of assets you own alone. Make sure that both of you leave clear instructions on what’s to be done with assets you brought into the marriage so there is no question of your wishes later on.
Don’t Forget the Stepchildren
If you intend to leave a portion of your estate to any stepchildren, you must designate them as a beneficiary. Most states do not recognize stepchildren as direct heirs, so they will likely be left out if you do not name them.
Designate the Important Positions; Guardians, Executors, and Trustees
For parents of minor children, it’s incredibly important to designate a guardian for your children in the event of your death. It does not need to be your spouse; however, if your spouse is the other biological parent, they are normally given full-custody by the state. Also, don’t forget to name someone you trust as the executor of your estate and if you have a trust set up, make sure your trustees and successor trustees have been named. It’s good practice to cover all your bases and check with these individuals to make sure they’re comfortable with the responsibility before assigning it to them.
While not necessarily romantic, blended family planning shouldn’t be delayed. Even more than a traditional family, your new situation is reflective of a change in your status and lifestyle that requires extra care and planning. You may have more people to provide for now and you’ll want to make sure you don’t waste any time seeing that they’re included in your estate plan.